Popular retailer enters alternative to bankruptcy liquidation

It has been a brutal year for retailers. A number of big-name companies simply never recovered from the covid pandemic.

Even if their sales bounced back to precovid levels, they never rose to the points they needed to pay the debts that grew during the months when many stores were closed. This vicious process claimed Bed Bath & Beyond, Tuesday Morning, and Christmas Tree Shops.

Those stores followed the traditional bankruptcy ark. They struggled, ran out of money, filed for Chapter 11 bankruptcy, and after they were unable to reach deals with their creditors they ended up in liquidation. It's an ugly process but one that actually somewhat protects consumers.

Related: Forget retail theft, Costco faces a potentially bigger problem

In the cases of those three major retailers, there was a period during the liquidation process when returns and gift cards were honored. People may have lost a favored store but they did not get screwed by the process.

In other cases, liquidation came out of nowhere. Mitchell Gold + Bob Williams closed suddenly, leaving some paid-for orders unfulfilled and others stuck at shipping companies with customers having paid for their orders but the furniture company not paying its vendors.

That, unfortunately, is what happened to another online retailer leader. The company simply stopped and moved from a going-out-of-business sale to simply disappearing. 

Now, at least, customers of that company know what has happened. The news isn't good.

Zulily moves to liquidation  

In December Zulily, a popular online clothing retailer, posted a going-out-of-business sale. That move came after the company implemented extensive layoffs. No specific dates for the business closure were given and the company did not file for bankruptcy.

It was a situation where customers did not know what was going on. Many likely assumed that all normal policies applied and that they could order items and expect to receive them. 

Now, Zulily has transferred its assets to a liquidation company, and that comes with some unpleasant answers for customers. 

"Douglas Wilson Companies announced that, on December 22, 2023, Zulily and its parent company entered into an Assignment for the Benefit of Creditors (ABC) and transferred all its assets to a third-party fiduciary, or “Assignee,” who will liquidate these assets and conduct an orderly wind-down of the business," the company said online. 

"Douglas Wilson Companies will coordinate the liquidation effort on behalf of the Assignee, Zulily ABC, LLC, and work to maximize value for creditors," 

In this situation customers essentially have no rights, and any money recovered in a liquidation will go to creditors.

Zulily customers are left in the cold

Zulily abruptly shut its website a few days before Christmas without explaining why. Now, the company has entered the liquidation phase and its vendors and other debtors will have priority over customers.

"An Assignment for the Benefit of Creditors (“ABC”) is a state statutory procedure by which an economically troubled entity ("Assignor" (Zulily LLC) transfers legal and equitable title, as well as custody and control, of its assets and property to an independent third party ("Assignee", here, Zulily ABC, LLC) in trust, who is required to apply the proceeds of sale of the property to the assignor's creditors in accord with priorities established by law,"  Douglas Wilson Companies, the liquidation firm, said.

ABCs are an alternative to traditional bankruptcy. Customers, however, don't even have a place at the end of the line.

Shipper orders will be delivered as planned. Some customers, however, are out of luck.

"As a result of this announcement, Zulily is legally unable to issue any refunds to its customers at this time and parties are required to file a proof of claim for outstanding amounts owed," according to the Douglas Wilson Companies FAQ.

Zulily's customer service team has been dissolved and any claims are being handled by Omni Agent Solutions, Douglas Wilson Companies' claims agent, at +1 888-202-5829. 

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